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How The Domain Name Game Is Getting Complicated

The Internet is going through a major overhaul. For the first-time in the history of the World Wide Web, information will be catalogued according to exact phrases. Instead one of having to conduct an exact search on a juggernaut search engine, one can simply type the desired term into the URL (uniform resource locator) bar, to find the specified result.

How is this possible? What does it all mean? Does the expansion of the Internet have more to do with business, or technology? It likely involves both. The Internet’s rebirth is the business of technology. The way people surf the Web, is based on the way they think. If the process of seeking out data changes, then the entire thought process of internet businesses must also evolve.

What exactly is changing about the Internet, and how can one make any sense out of it? Or, from a more aggressive standpoint: How can one profit by buying new gTLDs (generic Top-Level Domains)?

The Deal With gTLDs

A few months ago, a pre-registration and priority registration process began for new domain name extensions, also known as gTLDs. Priority registrations are usurping the authority pre-registrations, making them much more costly. These so-called new domains have a vast array of optional extensions, such as: .com, .biz, .info, .net, .org, and so on. There are also country code domain name extensions, like: .ca, .us, .co.il, .co.uk, .la. The almost innumerable list of domain names and coupled extensions seems to be only limited by one’s imagination.

Last year, one of the largest domain names registrars - in the online world market - developed a ingenious advertising campaign. The pitch was to market the domain extension, which had previously been assigned to a country, to appear as being the extension of a major metropolis. The .la extension, which was initially assigned to the country of Laos, was remarketed to represent the City of Los Angeles.

Initially, there was a fervent campaign for this promotion that drew a massive online following. The campaign lost steam when potential buyers noticed that many purchasers of domain names at the .la extension, had only bought these items to resell at auction. Actual websites may have emerged in some cases, but the overall trend seemed to demonstrate domainers (domainers are people who make money domaining: selling, parking, and developing internet domain names) were trying to capitalize on the hoopla by batch trading .la domains and then reselling them at auction.

Systemic Issues

Auctions are integral to the expansion of the information superhighway. Some domain names can be purchased for only one dollar, while other go for upwards of ten or fifteen dollars. The amount is dependent on the associative value (worth based on relation to brand or marketing potential). Some new gTLDs can fetch 40 to more than 200 dollars during an initial launch period, depending on the registrar.

There are, however, some unsavoury registrars. Some domain wholesalers will sell new clients, their first domain name for one dollar, and any additional domain names, at the set market value. This exaggerated price could be thousands of dollars. It may seem bizarre that a set of letters, which may or may not form an actual word, could cost more than a house. Historically, some domain names, particularly those using the .com extension, have sold for many millions of dollars. Here is a quick list of some of most expensive sales of domain names:

VacationRentals.com: $35 million in 2007

Insure.com: $16 million in 2009

Fund.com: $12.08 million in 2008

Business.com: $7.5 million in 1999

Diamond.com $7.5 million in 2006

Beer.com $7 million in 2004

The profit margins for domain names are potentially humongous, some worth more than many large estates. Like an immovable chattel, domain names can be bought, sold, and leased. These virtual items are sold at auction via a variety of auction websites, some of which bill a commission to the seller upon the sale.

Many of the large registrars offer an auction database, where domain names can be perused and bid upon. Domain names can also be sold on other websites, many of which exist solely for the auctioning, leasing, and cash parking of domains.

The number of bids for a set domain and the number of days it has been listed for sale will be displayed, along with the expected sale price. In some cases, a reserve amount will have been set. This ensures that the domain name cannot be sold – unless the highest winning bid was greater than the reserve price.

The Next Stage Of The Web

New domain names, or rather new gTLDs, are now upon us. The World Wide Web will soon be inundated with new domain names and new extensions. This means that there will be many new websites, and many more domain names, sold at auction. What are these extensions, and how are they being sold? Who is selling them, and who is overseeing the sale process? Is specialized knowledge needed to be able to buy them? Does one need the advice of a lawyer, to ensure a smooth transaction? These new extensions include options like: .land, .estate, .ventures, .guru, and so forth. Really, whatever business a person is in, there will likely be a relevant extension available to them.

The new extensions are being sold by registries and being brokered through registrars. The process for purchasing new gTLDs is likely fairly complicated to the domain name novice. One can pre-register for a domain name by paying a set price, likely leading that person to believe they had acquired it. But if someone else priority registers the same domain name, then one will receive a refund of their purchase price and lose ownership of the new gTLD.

An even more obscure part of the system is that priority registrations are not autonomous. Many buyers can pre-register, or priority register, the same domain name through various registrars. This multiplicity of pre-registrations and priority purchases can result in buyers having to enter into bidding contests for their desired domain name.

The intricacies of the auction process remain undisclosed to the general populace. Set parameters of an auction can include: the length time for bids to be submitted/accepted, and the number of offers to be received. While there is some governance of the process, the Internet continues to be a free-zone of adaptation; evolving according to necessity.

One is well advised to seek legal counsel before buying a new domain name. One must be careful to avoid infringing on the intellectual property rights of someone else, both nationally and perhaps internationally. Trademark holders can also usurp the seeming autonomy of a new gTLD purchaser during the initial phase of release for a new domain name extension. Even where there are multiple pre-registrations, of a new gTLD - which would normally result in it being marked for an auction process - a trademark holder has the first right to their brand’s name.